We keep hearing about a dreaded list that the Federal Deposit Insurance Corporation (FDIC) keeps of banks that are flirting with insolvency. The question is, how can this list help you with your investing? If you’re not interested in buying stocks on specific banks, for instance, the individual banks on the list aren’t going to mean much to you. However, watching the general trend in the number of banks that are on the list can help you make better investing decisions.
[VIDEO] The List of FDIC-Insured Problem Institutions
The FDIC publishes a Quarterly Banking Profile that is released approximately 55 days after the end of each quarter. In this profile, the FDIC provides an update on the number of institutions that are currently on its “problem” list.
For individual investors who are not interested in buying or selling stocks or options on specific financial institutions, the names of the banks on this list are not that important. What is important is the trend in the overall number of institutions that have made the list.
Here’s what you want to look for:
If the total number of institutions on the list is increasing, you know that the economy is not doing very well, and stocks in general are most likely going to be moving lower.
If the total number of institutions on the list is decreasing, you know that the economy is improving, and stocks in general are most likely going to be moving higher.